The Mystery of US Inflation and US Dollar Appreciation

DOI

10.2991/978-94-6463-916-2_9How to use a DOI?

Keywords

Exchange Rate; Inflation; Purchasing Power Parity; Monetary Tightening

Abstract

In the post-pandemic era, against the backdrop of high inflation in the United States, the U.S. dollar exchange rate did not depreciate as predicted by the purchasing power parity (PPP) theory due to the decline in purchasing power. Instead, it experienced a significant appreciation. This paper reviews the determinants of exchange rates and, combining real-world data, explains the phenomenon of simultaneous decline of USD’s purchasing power and its appreciation against other currencies from 2021 to 2022 through factors such as purchasing power parity, interest rate parity, international capital flows, and macroeconomic policies. The study finds that due to the impact of the pandemic, the supply of U.S. products decreased, while the government implemented expansionary fiscal policies, leading to increased demand, resulting in domestic depreciation. At the same time, the Federal Reserve adopted interest rate hikes to curb inflation, leading to the rise in the U.S. dollar exchange rate. Through the analysis of the U.S. exchange rate, this paper supplements the understanding of how factors influencing exchange rate movements interact in practice.

Copyright

© 2025 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Haotian Jia
PY  - 2025
DA  - 2025/12/22
TI  - The Mystery of US Inflation and US Dollar Appreciation
BT  - Proceedings of the 2025 4th International Conference on Public Service, Economic Management and Sustainable Development (PESD 2025)
PB  - Atlantis Press
SP  - 71
EP  - 78
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-916-2_9
DO  - 10.2991/978-94-6463-916-2_9
ID  - Jia2025
ER  -